The holidays came six months early for credit unions this year, in the form of a National Credit Union Administration (NCUA) ruling that allows remote teller technology to qualify as service facilities. This gives credit unions the ability to expand their footprint and nudge in on banks at lower costs, likely vaulting video ATMs into the mainstream when it comes to customer acquisition and branch expansion.
For Kathy Herziger-Snider, vice president of product development for CO-OP Financial Services, a credit union resource sharing cooperative, the NCUA's move will provide technology relief at a time when labor costs and cost per transaction are on the rise for fully staffed locations. "We are currently exploring several projects which position CO-OP to offer our credit unions a variety of self-service options, combined with the transaction processing and customer service," she says.
The NCUA earlier this month said credit unions can use video teller machines as "service facilities" as part of expansion programs.
Credit unions are allowed to expand and pursue distinct membership groups in new geographic areas as long as the credit union has service facilities within a reasonable distance from the potential members, and where the formation of a new credit union to serve that particular group of prospective members is not practical. To qualify as service facilities under the NCUA's rules, video ATMs have to meet certain criteria, such as providing real-time, face-to-face video access to live tellers at regularly scheduled weekly hours; using credit union or shared branch staff as tellers on screen; allowing members to conduct all transactions available at a traditional facility; and being reasonably close to members.
For CO-OP, which has about 3,000 credit union members and an ATM network of about 30,000, the ruling should give its video teller project a shot in the arm.
CO-OP has been testing video ATMs in a joint project with Diebold (DBD). "Video teller is a perfect solution to maintaining market visibility while controlling overall costs," Herziger-Snider says.
The new rule also stands to make video tellers part of the battle over expansion between banks and credit unions, as both can use the machines to quickly enter new and remote markets without building branches.
"This will improve credit union convenience and will make it more cost effective for credit unions to pursue new members," says Keith Leggett, a vice president and senior economist at the American Bankers Association. Richard Reisse, a vice president and compliance manager for the ABA, said the group would probably not weigh in on adopting one service option over another from a competitive standpoint.
Video tellers have been gradually penetrating the credit union market as a general service improvement and cost cutting measure within existing footprints. Early adopters include Mid-Hudson Valley Federal Credit Union in Kingston, NY; Coastal Federal Credit Union in Raleigh, NC; and American Heritage Federal Credit Union, which serves the Philadelphia area. Banks are also adopting the new terminals for a variety of reasons, ranging from serving remote consumers to deploying more, but smaller, branches in neighborhoods.
"Video ATMs really cut down on your costs where you would be looking at having tellers just standing there at branches. We can develop branching without having to add [heavy resources]," says Bruce Foulke, CEO of American Heritage Federal Credit Union. Foulke says he can particularly see benefits of the new NCUA rule for credit unions that operate in the western U.S., where there's less population density and fewer existing bank and credit union branches.
ATM technology firms also stand to benefit from the NCUA's ruling, since it means more video ATM upgrades for credit unions, and subsequently banks installing video ATMs to keep up.
"The NCUA ruling is a significant recognition that credit unions can serve underserved communities. Instead of building brick and mortar locations, the branches will get smaller, similar to the footprint of a personal teller machine," says Gene Pranger, CEO of uGenius, a video teller firm.
Linda Perconti, director, delivery channel solutions for Diebold, says the firm's ATM design allows it to upgrade its Opteva ATMs for financial institutions that are seeking a video-enabled solution.
A community bank trade group wasn't pleased with the new rule.
"The use of video tellers is a way for credit unions to expand into areas where they should have offices," says Chris Cole, senior vice president and regulatory counsel for the Independent Community Bankers of America.